Blog - Emerald Financial Partners

KPI’s for Your Business

If you are involved in making decisions for your business' growth, then you know: it's a numbers game and KPI's (Key Performance Indicators) are one great place to start! KPI's are performance metrics that measure specific goals for businesses across all sectors.

Common things that Key Performance Indicators might track are:

Revenue (profits, total revenue, and new customers)
Employment statistics (employee turnover, performance, and vacancies)
Customer service (average call time, efficiency and customer satisfaction)
Marketing (sales generation and overall effectiveness)
Efficiency (overall efficiency, departmental processes and individual efficiency)

We help most businesses identify the KPI's for your industry and then determine which ones are most critical to your success. Many businesses believe there is inherent value in creating sales and marketing goals, and there's also value in measuring those goals on a week-to-week basis. At quarter's end, sales and marketing results will indicate if quantitative data was left out of your organization's process. In other words, if you fail to track numbers at the beginning of the quarter, you won't be happy with your numbers at the end of the quarter.

I want to discuss how your team can begin measuring numbers with consistency, because the reality is that numbers are too important to ignore.

One of the hardest things about tracking your numbers (read: growth or decline) is transparency. It's hard to let others in on the reality of your business' sales and marketing efforts, especially if there's underperformance. But that's exactly why you should press for such transparency.

The more your team knows the numbers and what to strive for, the greater sense of urgency and ownership your employees will possess.

Of course, calculating any amount of numbers, goals and metrics takes time. But it's worth carving out a few minutes each week in the long run. I want to encourage you to conduct a meeting with necessary team members, once a week, to go over a weekly scorecard.

Don't get complacent with lazy systems in your office. If tracking numbers is lacking numbers, it's time to step up and change the status quo.

This stuff is science. Quite literally (testing and solving and testing again until you get it right). But you don't need to make it ... say it with me ... rocket science.

Here are the sorts of things you can track in a weekly scorecard...

Price, term, refund and premium tests for profit
Customer acquisition and retention
Advertising response rates (digital and print)
How many in the new prospect pipeline (and their collective cost benefit)
New and qualified leads
New sales meetings
Revenue streams in concordance with your team's budget
Other such items specific to your business -- only you know what should go in this scorecard column

The biggest component here is that you actually do it. If you already keep a scorecard, that's great! How consistently do you go over the numbers yourself or with your team? Don't let the method or "prettiness" factor prevent you from taking action and implementing a weekly scorecard at the beginning, middle and end of your process. You'll like the final result.

We work with businesses of all sizes, to help identify KPI's, areas for growth, and ways to increase profitability. Contact Emerald Financial Partners today and let's get started!

Mar, 2019

3 Steps Toward A Better Business Budget

It's amazing -- and scary -- how many businesses operate without a true budget. Cash flow becomes their only barometer, and that often doesn't include an accurate picture of ongoing growth, or the health of a business. One of the most important aspects to budget success is accountability. (That's what we can help you with.)

Before Step 1: You and your budgeting team should schedule a recurring meeting at the beginning or end of each month to discuss the budget, what's going well, what needs to change. This is the first step towards accountability.

STEP 1: The Costs You Count On

Once your meetings are set, and you've created a budget document (Excel, Sheets, Quickbooks, etc.), record income and fixed costs which you'll revisit every month. Those two items are crucial to surviving and thriving as a business.

To start, income will largely include sales -- this is why it's important to nail down recurring customers or businesses who utilize your services. If you can lock them in as monthly buyers (subscription service, ongoing help, etc), you will have an easier time calculating revenue streams.

Next, record what fixed costs your business takes on every month. How much money does it take for you to survive? Pay rent? Pay employees? Setting this number will give you a monthly goal to reach, and will help your sales team go out and (hopefully) exceed that number.

STEP 2: The Variables That ... Vary

You guessed the next item: what you can't depend on from month-to-month.

But that doesn't mean you can't predict! This is where goal setting comes into play. I'm talking about realistic, measurable goals. A large reason you are doing this with other team members is to discuss, set and revisit goals every month. It will also give your business development team tangible numbers to go chase.

Want to hire a new employee in the second quarter? Great, write that expense down. Want to take your team on an end-of-year retreat? Write it down. When is your peak season, and how much more do you think you can make this year than last?

Again, variables pertain to income and expenses you can't rely on from month-to-month, but you can predict ... and isn't business one big prediction?

STEP 3: Designate a Scribe

If you thought I was only going to mention your budget document once, think again.

It is crucial, as part of your new business budget, to have a place where you or someone on your team records each expense, variable and income source (let such items fill your Y-axis, while each month headlines your X-axis). Here's a few to get started:

Income

- Product/Service Sales
- Loans
- Savings
- Other

Expenses

- Rent/Mortgage & Utilities
- Salaries
- Bank Fees
- Web Hosting
- Insurance

Variables

- Contractors
- Advertising
- Transportation/Travel
- Office Supplies/Furniture

Those should get you started, but only you will know all the items to include. After you add up your income and subtract your expenses, you'll have an idea of where your business sits. It can be as sobering as it is enlightening.

Now don't waste any more time if you have not created a business budget in the past! Your team will thank you for taking the lead, and it will help position them for success.

If you need help with creating a business budget, contact us today! Need more help, we can provide Outsourced CFO Services too! Get started today!

Mar, 2019

Do You Have a Second Office in the Home?

In today’s virtual world, home offices are becoming the norm. Many professionals are creating a hybrid work environment, splitting time between the office and home office. Here are some tips when the Second Office in the Home Is a Principal Place of Business:

When possible, you want to claim that your second office in the home qualifies as a principal place of business because this classification

gives you the home office deduction, and
eliminates commuting from your home to your regular office.

Current law gives you two ways to claim your office in the home as a principal office:

First, as a principal office under the rules that the Supreme Court finalized in Soliman
Second, as a principal office under the alternative after-Soliman rules, wherein lawmakers added this alternative: “… the term principal place of business includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business”

Test Your Knowledge: If you have an office downtown where you spend 40 hours a week, can you claim that you have an office in your home that qualifies as a principal office if you spend only 12 hours a week working in the home office? If you said no, you are not alone. But you would also be wrong.

With the administrative or management rule, you can have your principal office in your home with 12 hours of work a week, even when you work at your other office for 40 hours.

Want to find out more? Contact Emerald Financial Partners today! We help individuals and businesses with all of your tax requirements!

Source: IRS Home Office Definition

Photo Credit: https://www.steinhafels.com/office

Feb, 2019

What happens if you haven’t received a W-2 yet?

Word on the tax professional "street" is that tax filing numbers are down across the board so far. It seems that many taxpayers are a little skittish about all of the changes this year. And some folks are seeing lower refunds than they might have expected. It makes for a stressful time of year. One of the most common questions we receive is about what happens if you haven't received a W-2 yet?

So, I thought I'd take a moment to answer that for you. If you work, or have worked, for somebody else, you know a W-2 form is essential when filing your taxes. Without it, you're stepping into the batter's box without a bat. This particular tax form summarizes your annual income, benefits and taxes.

But if you have yet to receive your W-2 from a current or past employer, I want you to first contact them and ask why the delay. If you receive little response, or an unhelpful one, please consider these three important steps. You might need to implement one or all three of them in an effort to obtain the document and get on with your filing.

If none of these three options work, please reach out to me immediately. We can discuss the next best steps you can take moving forward.

Reach out to the IRS

The good part is that the IRS has made an effort to streamline their customer service questions through a toll-free number: (800) 829-1040. Calling this number is your first step toward receiving a substitute W-2 which you'll need ASAP.

The bad part in dialing this number is the automated process it will walk you through (and the potentially long wait time). But if it's a matter of receiving such an important document, enduring the process is a solid option. In addition, before you call, make sure you have these documents/details on hand:

- SSN

- Employer's name, address and phone

- Dates you had or have been employed

- Estimate of wages you earned from the previous year

We can help you with this.

Fill One of These Out Instead

If you're low on patience with the IRS, and your employer has yet to deliver your W-2, there are a couple more forms you could fill out.

Form 4852 is a "create your own" W-2 form, and you can use some of the information you prepared for the IRS, and therefore have on hand, to fill it out.

If the thought of creating a substitute W-2 makes you wary, you could request a filing extension using Form 4868, which will give you an extra six months to file your taxes. And if an extra six months is not enough to receive a W-2 from your boss, then you might have other issues to resolve in addition to filing taxes on time.

We can also help you with this.

Correct Any Mistakes

Sometimes, after completing the custom W-2 using Form 4852, taxpayers will send that form into the IRS, only to receive their actual W-2 days later. Use the real W-2 to double-check the information you wrote down on your 4852.

And if, for instance, you forgot to mark down a bonus you had received (in addition to your income from the year before), I don't want you to panic.

Form 1040X isn't as intimidating as it sounds. It will help you record the changes necessary to your W-2, which the IRS will fix after you mail it in.

Again, if you complete these steps or have further questions, please give me a call. Trying to file your taxes without a W-2 is not a happy feeling ... but you're not alone.

I commend any effort you take to resolve this issue on your own, but don't hesitate to reach out for help. Talking with people like you is why I love my job.

Feb, 2019

What Gig Economy Workers Should Know About Taxes and the IRS

Are you part of the gig economy? According to WhatIs.com, the "gig economy is a free market system in which temporary positions are common and organizations contract with independent workers for short-term engagements. The trend toward a gig economy has begun. A study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors." In basic terms, think about folks who are Uber drivers, Airbnb hosts, etc. Basically, anyone who gets a 1099-K is part of the gig economy and that could mean the IRS will be focusing on you in the coming months and years.

A new report from the Treasury Inspector General for Tax Administration (TGITA) said the IRS should be providing more accurate guidance and notices regarding self‑employment tax obligations. Many self-employed workers are responsible for tax withholding and compliance and the guidelines may not be clear.

For the report, the TIGTA reviewed cases in the IRS’s Automated Underreporter program for taxpayers who work in the gig economy with discrepancies between what’s reported on their income tax returns and the payments reported on their 1099-K forms, payment card and third-party network transactions, by payers for tax years 2012 through 2015. The discrepancies and underpayments of taxes were very concerning.

The TIGTA noted that the treasury regulations don’t require companies to issue a Form 1099-K unless workers earn at least $20,000 and engage in at least 200 transactions. That means many taxpayers, who earn income in the gig economy, don’t necessarily receive a Form 1099-K, so their income isn’t always reported to the IRS. “When income is not reported to the IRS, taxpayers are more likely to be noncompliant,” said the report.

This issue will likely be further investigated, and new processes put into place to minimize non-compliance but it also may cause gig economy workers to be at a much higher risk for future audits.

Source: https://www.accountingtoday.com/

Jan, 2019

Real Estate & QBI Deduction

On Friday, January 20, 2019 the IRS issued final regulations as well as some additional guidance in regard to the QBI deduction for 2018. Much of the final regulations simply make the temporary regulations from August 8, 2018 permanent. However, there is some additional guidance for persons involved in real estate (information on real estate & QBI deduction) below. We've also provided some checklists below that can help you determine if you qualify for the Qualified Business Income Deduction (QBID).

Rental Activities
Taxpayers can continue to apply the trade or business tests, which is the “regular, continuous, for profit” 3-part test of Code Section 162. However, in IRS Notice 2019-07 they also provided a safe harbor to qualify rental real estate activities for the QBI deduction that meet these three tests (applied separately to each property, or similarly at the taxpayer’s choice for all properties of the same type: residential or commercial):

1. Maintain separate books and records for each rental activity;

2. Perform at least 250 hours (or agent/employee or subcontractor) of rental services for each year for each rental activity; and

3. Maintain contemporaneous records, logs or similar documents showing time, description, dates and who performed the services.

We have 2 checklists below: first for real estate professionals; and second for clients claiming the safe harbor exemption for regular rentals. The safe harbor rules may be used by individuals and pass-through entities such as LLC’s. The tests apply until 2023.

Rental services that qualify include advertising; negotiating leases; verifying tenant applications; daily operation and maintenance; management; and supervision of employees and contractors.

Some rental activities are excluded from being able use the safe harbor including triple net lease activities and real estate used by the taxpayer as a residence (such as an Air BNB).

Finally, the taxpayer must include a signed statement with the return that they meet the requirements of this procedure.

Due Diligence Checklist for QBI Deduction-Real Estate Rental

Instructions: Meet either 1 of the 2 tests and taxpayer qualifies for QBID @ 10/31/18 rules

Real Estate Professional Test 1	YES	NO
Does taxpayer spend at least 50% of total annual work hours in a real estate trade or business?
Does taxpayer have detailed time records to prove 50% test?
Are the records substantiated (written) and currently maintained?
Does the taxpayer spend at least 750 annual hours in the trade or business (not counting time as a W-2 employee unless >5% owner)
Does the taxpayer spend at least 500 annual hours on this specific property (may include spouse’s time)?
Does taxpayer have detailed time records to prove the 500 hour test?
Are the records substantiated (written) and currently maintained?
Summary: if all above answers are “Yes” the taxpayer is a real estate professional and would generally be considered to meet the “regular, continuous, for-profit” rules to qualify for the QBI deduction

Conventional Rental IRS Notice 2019-07 Safe Harbor Test 2
On a regular basis does the taxpayer consult with advisors, negotiate and execute leases, consult with or act as property managers or personally maintain, manage or supervise the rental activity of the above property?
Does this activity continue throughout the year?
Does the taxpayer, employees, agents or independent contractor of the taxpayer spend at least 250 hours annually dealing with the advisors, managers or personally with tenants, repair or maintenance companies or on-site issues?
Does the taxpayer maintain contemporaneous written calendar time records to prove the above regular, continuous activity?

At Emerald Financial Partners, we are devoted to sifting through all of the rules and regulations to ensure you maximize your tax deductions.

Do You Qualify for the QBI?

Get help with your taxes today!

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Jan, 2019

How Will The Government Shutdown Impact Taxes?

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Emerald Financial Partners is offering 10 Free Quick-Call Consultations from 1/21/19 - 1/29/19 for Government Contractors & Businesses affected by the shutdown.

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As of this writing, the federal government is still in a "partial shutdown", and things are starting to fray around the edges, even for those whose paychecks aren't being affected. Already, it's the longest government shutdown in history. But, how will the government shutdown impact tax filings, refunds, and your returns?

By the time you read this, things could be back to "normal" but here's one thing that won't stop during this shutdown, however long it lasts: your taxes.

That's right, the IRS confirmed last week that they will remain operational during the shutdown, your taxes will STILL be due this year (including your estimated payments, if that applies to you), and the official start of tax filing begins on January 28th. But refunds might still be affected. We'll keep you posted.

So, here are the things you need to remember:

Get your taxes prepared early. The 2018 tax changes affect many of our individual and business clients. You may expect a refund this year, but you may be in for a surprise! And, if you owe, you'll want to know that NOW so you can plan ahead if you have to write that check in April.
The Government Shutdown likely won't dramatically impact tax return deadlines. While the government determines how it will handle tax season during the shutdown, there likely won't be a big change in the tax deadlines, so there is absolutely no reason to wait.

Since there were a lot of changes made to the tax laws as part of the 2018 tax reform, you'll want to be sure to work with a professional tax advisor, like Emerald Financial Partners.

We provide individual tax preparation to help you get every deduction you’re entitled to and help you avoid audits and costly mistakes that can arise from DIY online software.

And, if you ever do need help with the IRS, we provide the support you need. Can your online software do that?

Contact Emerald Financial Partners today to get started!

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Get Answers Now!

Jan, 2019

How the New Tax Law Changes Affect Individuals

Everyone seems to think that the new “postcard” return will make income tax preparation easier! Not true. The recurring theme in all of our continuing education classes this year has been the 20% increase in time we can expect to properly complete your return. Here are some of the major changes that have occurred.

Fewer People Will Get Refunds

The new Federal withholding tables were designed to lower your total tax bill for the year by giving you a bigger paycheck throughout the year. Unfortunately, they were not designed to give you a refund at year end, and for those of you that did not heed our warnings to change your withholding, your refund will be very small (if any) because you already received it in bits and pieces through larger paychecks throughout the year. One of our simple recommendations for 2019 is that all married individuals fill out a W-4 reflecting “single and zero” withholding.

Itemized Deductions Reduced Dramatically

The ability to itemize deductions has been dramatically decreased because the new law provides a much, much larger standard deduction. (You are allowed to deduct the greater of the two).

However, we still need to accumulate th

e information on your medical, tax, mortgage interest, charity and other deductions in order to apply the new rules, and to complete your state tax returns.

Home Equity & 2nd Mortgages

A major change has occurred on home equity lines and 2^nd mortgages, most of which are now not deductible. In order to get your largest deduction, we will need to know much more information on these amounts than in the past such as amounts borrowed and use.

Other Tax Changes

Employee work related business expenses are no longer deductible on the Federal return, but we may still need
the information for your state return, and if you incur a lot of these types of expenses, you need to discuss the use of an accountable plan with your employer.

Most home-related energy efficiency credits are now expired, but an incredible 30% Federal credit still exists for
solar, wind and geothermal costs; and a $7,500 Federal credit for buying a fully electric car still applies through the end of 2018.

If you are retired, over age 70 ½, and have an IRA you must utilize the direct IRA to charity transfer tool to make charitable contributions. This simple trick can save you hundreds of dollars in income tax.

Start a Health Savings Account Now

With over 50% of working Americans now covered by health savings insurance policies, it is of absolute importance that you start a health savings account, even with $50, and discuss some excellent tax-savings ideas with us for these tax-beneficial plans. And yes, you were still required to maintain health insurance for every member of your family for 2018 or face a potential penalty.

Future Tax Planning Is Key

Every year we are told “I pay too much in taxes” or “I want some of the tax loopholes that rich people get”. We can answer both statements with one answer. Rich people get no more tax deductions or “loopholes” than anyone else, they just take advantage of what is there to keep their taxes at a low legal level. The single greatest tax “loophole” that they use, which few average people use to its limit is the
ability to defer nearly $20,000 into a 401-K if your employer has one. If your employer has a 401-K and you are not putting the maximum deferral in it, there is no reason to even think about other tax planning ideas.

In the current tax era of greatly increased requirements to itemize deductions, a tax “bunching” strategy is absolutely mandatory. The “bunching strategy” recognizes that the best tax deductions are obtained by putting deductions in one year rather than spreading them amongst several years. For example, in years where your charitable contributions
are very low, hold off until the next year to catch up, then also pay the full amount of the next year’s contributions in the “catch up” year in order to double your chances of itemizing. Similarly, few Americans receive medical deductions anymore, but if you incur a large expense for say, the deductible on surgery, then try to do all of your other medical items in the same year, such as dental and vision exams, check-ups, etc.

Check into your employer’s handbook to see what employer provided fringe benefits are available. Taxpayer’s are often surprised at the available benefits, or at our explanation of what some benefits really mean.

Contact Emerald Financial Partners today! We are happy to meet with you throughout the year for tax planning, retirement and similar income tax related
issues, and sincerely appreciate your continued business each year.

Dec, 2018

Is Your Accountant Proactive or Reactive?

When you own a business, there are many aspects of your business where you will want to be proactive vs. reactive. For example, you may be proactive in managing your monthly cash flow, or you may be reactive when you run out of money! In this article, we’ll discuss some of the ways you can determine if your accountant is proactive or reactive, and why it matters.

In a reactive business, the tendency is to respond to events after they occur, while proactive strategies are designed to anticipate possible challenges and plan ahead. At Emerald Financial Partners, we believe that the accounting of your business should always have a proactive element.

By definition, the word proactive is, “creating or controlling a situation by causing something to happen rather than responding to it after it has happened.” What does this all of this mean when it comes to accounting?

A reactive accountant addresses issues after they’ve happened and, in some cases, performs routine crisis management. That can be stressful on the business! Often, the accountant is dealing with numbers as a historical event; that is, the income and expenses that have already happened. They are responding only after something else has caused a concern to arise. At tax time, they put numbers in boxes, perform calculations and provide a synopsis of what could be changed going forward, based on this history. This is reactive accounting.

A proactive accountant, on the other hand, is working side by side with the owner, collaboratively to help them grow their business. A proactive accountant is an adviser that is looking for opportunity to position the business for profitability, tax savings, expense reduction, and more. A proactive accountant addresses the client’s needs before they become urgent issues.

In 2018, the difference between a proactive accountant and a reactive accountant was never more obvious. With all of the tax changes affecting small businesses, a proactive accountant, like Emerald Financial Partners, suggested a review with their clients to ensure that the business was pivoting to take advantage of new tax benefits before year end. Some of the ideas we reviewed with our clients included:

Whether their business was categorized under the proper entity based on new tax laws,
Would be impacted by the new Qualified Business Income deduction,
That the salary calculations and requirements for business owners was being met

In addition, we meet with clients regularly and advise them on ways to grow their business. Is your accountant:

Focused on real-time tax planning or just a once a year look-back?
Knowledgeable about your specific industry and/or challenges? Able to make recommendations, based on this knowledge, about ways to grow your business or increase profitability?
Providing ideas to save you taxes for the coming year?
Aware of your business goals and providing regular guidance and feedback to help you reach those goals?

As a business owner, the difference between a proactive or reactive accountant could mean the difference between success and failure. Are you working with a proactive accountant? If you’re not sure, contact Emerald Financial Partners and we’ll get you and your business on the right path.

Nov, 2018

Businesses: Get Accounting Advice Before 12/31

Each year, we help our business clients review their business and tax changes. This year, though, it is more important than ever to meet with your accountant!

According to a recent article from ABC News, "it's particularly important [this year] because of the law enacted nearly a year ago. Owners who don't have regular conversations with tax advisers may not understand the changes, many of which are significant and complex."

If you haven't met with your Accountant, or they haven't asked for a meeting with you, WHY?

Here are a couple questions you need to ask about:

The Small Business Deduction
Should You Incorporate?
Can You Deduct Entertainment?
Are There Cost Reductions for Your Industry or Small Business?

You can't correct some of these issues after 12/31/18, so it's really important to review and discuss the tax implications while there is still time to make needed changes.

If you need help, contact us today!